Direct to consumer channel could boost sales

Direct to consumer channels could boost manufacturers’ sales by 5%, claimed LCP Consulting. LCP’s Will Shepherd pictured

Food manufacturers could boost their revenues by 5% by opening direct to consumer (DTC) supply channels, according to a new report from a global supply chain management consultancy. 

According to Richard Walters, principal consultant with LCP Consulting, DTC had an important role to play for food and drink manufacturers and was an excellent way for smaller businesses to establish market demand and drive growth.

“It doesn’t have the traditional geographical limitations of bricks and mortar sales,” added Walters.

“It’s especially useful where goods are both lightweight and ambient to enable low cost and easy fulfilment. More generally, for brands in the luxury goods market it is a key channel as it enables a more intimate relationship with the end consumer which can be a real value driver.”

The report, produced in partnership with the Centre for Supply Chain Management at Cranfield University, surveyed executives from more than 100 companies worldwide about DTC channels. A third of the respondents were from manufacturers in the food and drink industry.

Looking to create DTC channels

Almost half of the manufacturers asked (48%) said they were looking to create DTC channels, while 87% said they saw DTC as relevant to their products and consumers.

Walters said that businesses with existing high street customer relationships could reinforce their overall brand presence with the addition of DTC.

Benefits of direct to consumer, according to LCP
  • Control and clarity of brand – through product, packaging, and brand message.
  • Full share of the ‘customer experience’ – brand alignment throughout the purchasing process.
  • Speed to market – development, testing and introduction without seasonal delays or other retail interruptions
  • Direct access to the customer – yielding a wealth of valuable data and insight.
  • Assortment access – providing consumer choice from the full product range, not a limited sample.

Cranfield School of Management professor of supply chain strategy logistics, procurement and supply chain management Richard Wilding said: “Manufacturers are increasingly focused on gaining control of the supply chain through to the consumer.

“This benefits them by gaining direct understanding about consumer preferences with regards to products and services, thus reducing costs and increasing value for both parties.”

While moving to a DTC model could benefit manufacturers, LCP said it would take a lot of work to implement.

Lot of work to implement

This included: establishing a brand presence, building an e-commerce platform, potentially opening stores, distribution, fulfilment, and last-mile fulfilment. See the box for the advantages of DTC.

Will Shepherd from LCP Consulting said DTC offered manufacturers the opportunity to market, sell and distribute goods directly to the consumer, bypassing traditional wholesale and retail channels.

“This channel can bring businesses new opportunities as well as dilemma [whether or not DTC is the right channel for the business and if they are in the position to invest the sums required to develop it],he said.

“Those manufacturers who have already integrated a front and back end DTC model have the ability to deliver a seamless omnichannel experience for their customers. For them, an omnichannel approach is core to delivering significant long-term growth and value.”

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